Your financial plan will be reliant upon many factors: income, family composition, assets & liabilities, goals and ultimately, your life stage.
Planning for retirement is an essential part of your financial picture. Whether you are just starting out or retirement is within reach, having a cohesive plan will help take the stress out of eventually stepping off.
When you're starting out in you career, it can be difficult to even imagine retirement. It seems so far off! Managing student loans, rent, car payments and basic bills can be overwhelming with an entry level paycheck. But if you start early, you will truly be ahead of the game-- time is your greatest advantage at this stage in the game.
For example: Say at age 20, you begin investing $3,000 each year for retirement. At age 65, you would have invested $135,000. If you assume a 6% average annual return, you would have accumulated a total of $638,231 by age 65. However, if you wait until age 45 to begin investing that $3,000 annually and earn the same 6% return, by age 65 you would have invested $60,000 and accumulated a total $110,357. Even though you would have invested $75,000 more by starting earlier, you would have accumulated more than half a million dollars more overall.
As you can see, small amounts will add up over time.
As you begin to make some headway with your savings and career--- Boom! You start a family! Priorities shift and all the sudden you're thinking about college savings and spending money on everyone other than yourself. Resist the temptation to ignore your retirement. Just remember, would your children rather take out loans or have their parents move in with them later in life? This is an important trade off to understand.
If you decide to take time off to raise the kids, consider increasing retirement contributions before you leave and when you return to make up the difference.
With retirement upon the horizon, this is the perfect time to gear up and make those extra contributions. If you're age 50 or older, you may be able to take advantage of catch-up contributions, which allow you to contribute up to $24,000 to your employer-sponsored plan in 2015, versus a maximum of $18,000 for most everyone else. (Some plans impose different limits.)
This may also be a good time to hire a financial advisor to make sure you are on track to meet your retirement goals. You can start to discuss your healthcare needs, investment allocation, tax circumstances and estate planning.
Where do you land in the retirement stages? It may be tempting to avoid the thought all together, but even small steps towards understanding your plan can make a huge difference.